Can Companies Claim
R&D Tax Credits in Delaware?
Yes. Delaware offers an R&D Tax Credit similar to the federal version, including the definition of qualifying research, with a few state-specific rules.
Key Features of the Delaware R&D Credit
Only research conducted in Delaware qualifies.
Unused credits are refundable.
Taxpayers must apply to the Delaware Division of Revenue by September 15 following the taxable year in which expenses were incurred.
For taxpayers with average gross receipts under $20 million, the credit rate is increased to 20% for the first method, and 100% for the apportioned federal credit under the second method.
Two ways to calculate the credit:
10% of the excess of Delaware-qualified R&D expenses over the Delaware base amount.
2.50% of Delaware’s apportioned share of the federal R&D credit using the Alternative Simplified Method.
Delaware Tax Credit Case Study
A Dover-based company with fewer than 50 employees claimed R&D credits for a multi-year project spanning 2022-2024.
The company qualified for $271,832 in federal R&D credits and $114,562 in Delaware state credits.
FEDERAL | DELAWARE | |||
Year | Total QREs | Credit | Total QREs | Credit |
2024 | $1,200,000 | $127,166 | $1,000,000 | $52,986 |
2023 | $850,000 | $92,166 | $700,000 | $37,951 |
2022 | $500,000 | $52,500 | $450,000 | $23,625 |
Total | $2,550,000 | $271,832 | $2,150,000 | $114,562 |
Federal R&D Tax Credit Summary
| Year | Total QREs | Federal Credit |
|---|---|---|
| 2024 | $1,200,000 | $127,166 |
| 2023 | $850,000 | $92,166 |
| 2022 | $500,000 | $52,500 |
| Total | $2,550,000 | $271,832 |
Delware R&D Tax Credit Summary
| Year | Delware Credit |
|---|---|
| 2024 | $52,986 |
| 2023 | $37,951 |
| 2022 | $23,625 |
| Total | $114,562 |
Criteria for Qualifying Research Activities
The four-part test below defines what counts as qualified research activities
Purpose of the Research
The activity should develop or improve a business component, such as a product, process, software, formula, technique, or invention, by enhancing functionality, performance, reliability, or quality.
Resolving Uncertainty
The work must address technical uncertainties, such as determining the optimal design, method, or approach to achieve the desired outcome. The results should not be known in advance.
Systematic Experimentation
Eligible research must follow a structured experimentation process, including trial and error, modeling, simulation, or testing alternatives to reach the intended improvement.
Technological Basis
The activity must rely on hard sciences such as engineering, physical or biological sciences, or computer science. Artistic, social science, or routine data collection work does not qualify.
Why the R&D Tax Credit Matters ?
Since 1981, the R&D Tax Credit has helped businesses save billions in federal and state taxes. The credit enables companies to hire more staff, expand R&D, invest in facilities, and drive innovation. Thousands of businesses across multiple industries take advantage of this benefit each year.